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Why Microsoft is Serious About Open Source
#Monday, October 31, 2016

Open source software has had a huge impact on our industry. Over the last several years, just about every big IT vendor, including Microsoft, has embraced this approach to some degree. Now with Azure, Microsoft is telling us that it doesn't care whether we use open source software or Microsoft's own technologies.

Really? Can they be serious? Has Microsoft embraced open source this completely? The answer is yes, and here's why.

In the traditional software model, vendors made money through selling software licenses, as shown below.

In this approach, the vendor provides software that runs on the customer's premises, and the customer pays the vendor a one-time license fee. While there might also be annual maintenance fees, the bulk of the money the vendor gets is typically from this initial license.

This makes open source software, which typically shrinks or eliminates the license fee, a threat to the vendor's revenue. Steve Balmer famously called open source a cancer. I don't know what was in his mind when he said this, but open source is certainly a cancer on the margins of the traditional license-based software business.

Today, though, this model is being replaced by cloud services. The picture now looks like this.

In this situation, the vendor runs the software, and the customer pays a monthly usage fee. Whether the software that provides a cloud service is open source or proprietary or some combination of the two doesn't typically have much impact on what the customer pays. They're paying for the service rather than licensing the software.

This is why Microsoft is serious about open source in the cloud. Offering open source services, such as Azure's support for Linux, Node.js, and Hadoop, just gives Microsoft more things for customers to use. Because there's no software license revenue to protect, Microsoft need not care about what kind of software it deploys to provide a cloud service.

In other words, offering cloud services using open source software lets Microsoft make more money. And we should always trust Microsoft to do the things that will make them the most money.

In the pre-cloud era, open source was spreading into more and more areas, so much so that it was getting harder and harder for software companies to make money from traditional licenses. With the rise of cloud computing, this problem goes away, since vendors are now charging for usage. Maybe the cloud came along just in time to save the software business from the margin-destroying cancer of open source.

I interpreted his comment that way, too, which is why my note above says that open source is a cancer on profit margins. In any case, the analogy between the metastasizing GPL and cancer isn't too far off.